Transcript
Jigar Shah:
I'm so sorry, Josh, that I had some role to play in getting you down this rabbit hole. My God, this is getting technical so quickly. But it is super important. I think we could actually really increase grid utilization through this bill.
Senator Josh Becker:
Listen, it's a populist issue. Figuring out affordability is a populist issue. And if we can say, hey, this is the right way to do it, then we can work together with them on it for sure.
Introduction
Jigar Shah:
Hello, my name is Jigar Shah and I'm a clean energy entrepreneur.
Arnab Pal:
Hi, I'm Arnab Pal, and I'm a clean energy policy enthusiast.
Jigar Shah:
Wow, you're going to have to keep scripting that and trying new things every time. Or not.
Arnab Pal:
I still haven't gotten it yet.
Jigar Shah:
Well, today we are going to have our good friend Josh Becker on and talk a little bit about what he's doing to transform the state of California. Exciting times.
Arnab Pal:
Yeah, State Senator Josh Becker. We're going to get that right. Not only is he one of the leaders in this country on our issues and this space in general, he's a very interesting human being. He's got a great background and a great life story, and he's really formed a community in the legislature. So I think it'd be interesting to hear where he thinks we're at. In a world where we see a lot of negativity, he's still doing a lot of positive things.
Jigar Shah:
One thing I was curious about — you're also following the governor's race closely, right? It feels like a lot has changed. Swalwell had to drop out, now there are a few other candidates. But it still feels like a neck-and-neck race with three different people.
Arnab Pal:
Yeah, in some ways the race has completely changed. In other ways, it's the exact same as where it's always been, which is: no one really knows who's going to be the next governor of California. It seems like former Congressman and Attorney General Becerra and your friend Tom Steyer are in the lead. And then there are two Republicans who might have a chance who normally wouldn't. So for the first time in a generation, people have no idea who the governor of California is going to be.
Jigar Shah:
That's crazy. Well, I'm excited to talk to Josh Becker. Thanks for joining us as always, Arnab. You're always the person who brings the best insights to these kinds of conversations.
Arnab Pal:
I don't know if that's actually true, but I just like being on this podcast. So thanks for having me.
California's Affordability Reckoning
Jigar Shah:
Josh Becker, as I live and breathe, welcome to the podcast.
Senator Josh Becker:
Good to be here.
Jigar Shah:
You and I go so far back. I think we first met probably in the aughts. You were a venture capitalist. You did all sorts of cool stuff. You served in government on an important committee. And now you're an elected senator — not only elected from one of the most important parts of California, but actually running a lot of the energy policy in the state.
Senator Josh Becker:
Yeah. The legislature is the best thing I've ever done. I love it here. I love my colleagues. Getting good stuff done. And it's a lot of fun.
Jigar Shah:
Let's just jump right into it. As you know, the climate work in California continues. We've deployed so many batteries, solar, wind power, clean energy broadly — and it worked. Wholesale market prices have never been lower. We have a huge amount of power, so much so that we're now sharing all that excess with friends in neighboring states like Nevada, Arizona, and Oregon. But one of the things that's been stubborn is the wildfire costs and the overbuild on the wire side, which has really driven rates up. You've got a whole bunch of ideas on how to start to control those costs. So we'd love to hear about your agenda this year.
Senator Josh Becker:
Yeah, we've got a lot of ideas. We'll see if it's easy to get them passed. Listen, we've all been at this a long time. I remember I worked on EPA's first Clean Air Marketplace Conference in 1992 and walked around saying, "Oh my God, I'm sure all this great technology will be deployed in no time, including these electric vehicles." And it didn't happen. So I realized we need both innovation and markets.
Sometimes people promote — and we love when we have friends on the right who actually embrace clean energy — they say "innovation over regulation" or "markets not mandates." And the truth is we really need both. Even though we have a cap-and-invest system here in California, a lot of our gains in electricity came because we had the renewable portfolio standard. We said utilities have to have 5% clean energy, then 15%. Nobody thought we'd get that. Then 25%, then 50%, and on up. So it's been that combination.
But what we're seeing now is a real concern in California — really across the country — around rates. We have a number of different things we'll talk about, including using our existing grid more effectively.
Jigar Shah:
So you've been a senator for some time. When you were first elected, nobody really paid that much attention to their electricity bill. They didn't really understand all the components. It now feels different. People have all become investigative journalists. They're actually digging deep into where this is coming from. And it does feel like folks are starting to understand that they've sort of taken on the investment strategy of PG&E. This isn't just about the number of kilowatt-hours they're using. How have your constituents evolved in their thinking about electricity?
Senator Josh Becker:
The reality is we've already seen the warming in my area. When I first moved here 25 years ago, you didn't need air conditioning. Nobody had air conditioning. Then we had one wall unit because my daughter's room faced the sun, then another wall unit, then a mobile unit. And costs started to go up. Fortunately for us, we got heat pumps — so we now have air conditioning as well as greenhouse-gas-free heating. But people started paying a lot more attention to the bill. They don't really know all the specifics — they just know they're really unhappy.
Jigar Shah:
As California tries to electrify the rest of the economy — agriculture and some of these other things — one of the things we're facing right now is that gasoline prices have gone through the roof, and folks are thinking about EVs too. It feels like there are unlikely bedfellows that have come together to actually do big things, to change things in a fundamental way such that we can reduce electricity bills by 20 or 30%. I think when Tom Steyer first said that in his campaign — maybe in January, where he said we can reduce rates by 25% — people thought he was being hyperbolic. And now it feels like everyone's talking about reducing rates by a lot.
Senator Josh Becker:
That's certainly been the focus here in the legislature for a long time. With respect to Tom, we've been working on this for a long time. Think of the bill last year — we said a lot of the utility spending is on wildfire, and we can't really make sure we're getting the bang for the buck and aligning what's done at a local, regional, and state level in terms of the spending. Utilities are spending $10 billion a year on wildfire. Great. But are they doing the hard stuff? Are they doing the stuff they should be doing? Are we getting the bang for the buck?
We took $6 billion of their spend on wildfire and said: you have to do that with securitized debt, not with equity. So you can't rate base that. There was a lot of screaming, but it did happen. The big risk for utilities — the existential risk — is wildfire and bankruptcy. We started to take that off the table with a wildfire fund we set up. And this year we'll have taken another big look at the liability piece of all that.
Utility Accountability and SB 905
Jigar Shah:
You put forward Senate Bill 905 and you really try to go directly at the utility incentives. Do you want to talk about the problem you're trying to solve with that bill?
Senator Josh Becker:
Yeah. We're trying to get electricity rates down again. Fundamentally, one thing I learned in the private sector: it's all about aligning the incentives. And right now, the utilities make bigger profits and execs get bigger bonuses by spending more money. That's just how the incentives are set up.
We do see some good signs. PG&E is piloting a lot of good ideas like flexible interconnections and trying to work smarter. But as I say, hope is not a strategy. We need to make sure we have the right incentives so they'll be incentivized to do the right thing.
Part of that is looking at the return on equity. There are certain investments — like undergrounding, for example — that shareholders would agree to demand a lower return on, because those are things that get to the fundamental existential risk of utilities, versus something like buying a new transformer. So there's a part in there to look at having a different return on equity. And there's a part around getting the incentive structure of the VP level and higher at utilities to keep rates below inflation. That's at the end of the day the measuring stick we're trying to use. There are a number of pieces in there, but really we're trying to get those incentives right.
Jigar Shah:
One of the things you keyed in on is also around executive compensation. You're trying to link executive compensation to controlling electricity costs. How do you think that would work, and why does it matter?
Senator Josh Becker:
Well, instead of rewarding the people running utilities for maximizing spending and profits, we want to create some cost discipline. This will say 20% of your annual compensation is based on keeping rates from rising faster than inflation. We're not even talking about lowering rates, just keeping them from rising in real terms. If you can't do that — if you can't keep rates from rising — then you don't get the bonus.
I think it's important because only the people running the utility day to day, the people making thousands of decisions about what to do and what not to do — they're the ones who have to figure out how to prioritize, how to be more efficient, how to deliver safe, reliable, clean, affordable power within a budget that doesn't raise rates. Every business in the world has to figure out how to operate within a budget, within what their customers are willing to pay. We have a monopolistic system here, so they don't have those same constraints. This puts some of that discipline back in.
Jigar Shah:
The other thing you focused on is metrics. As any good businessperson knows, you manage what you measure. You've got specific things you want them to measure. Want to go through that?
Senator Josh Becker:
I've looked at this more as a dashboard, sort of a score card. Utilities are asked to do a lot of different things, so we don't want to focus just on one aspect of performance. This is like a KPI you'd see at a company. For utilities, we care about safety, reliability, cost drivers like spending and utilization of assets, customer service — like how quickly they can handle customer requests or interconnect new generators — and climate targets, like what percent of electricity is coming from zero-carbon sources. By laying out a set of performance metrics, we just say: this is good government. We're being clear that these are the things we really care about. Just saying so can be very helpful.
Jigar Shah:
There does seem to be a very large anti-utility sentiment as bills have gone up. For a while people thought it was a California thing, but now you're seeing it with Duke Energy in North Carolina, you're seeing it with Con Ed in New York City, you're seeing it with a lot of places where people have had higher rates. I'm curious whether you think these bills are anti-utility or anti-investment.
Senator Josh Becker:
Listen, the way our system is set up, we need healthy utilities. Their ability to raise capital and do all the important work it takes to operate their grid — while also reducing the risk of fires, switching over to clean energy, supporting load growth to power our economy — they're vital to the success. Ultimately their borrowing costs do affect the costs that get passed on to ratepayers. We need to be able to trust them as partners in this mission. We have some good leadership now that we're working with. But we don't want to constantly worry that they're trying to bloat their spending as much as possible to maximize profits for investors. So it's really: okay, let's talk about how we fix that problem. Let's align the incentives and then get back to working together to deliver safe, reliable, affordable, clean power. There's a way to work constructively, but within the right framework.
Using the Grid We've Already Paid For
Jigar Shah:
Back in the 1970s, Amory Lovins talked about the soft path — energy efficiency and all that. California has led the way on the soft path, figuring out how to do more with less. It's grown its GDP tremendously without having to grow electricity sales as much. Part of where we're headed now, as you referenced earlier, is grid utilization. Figuring out how we actually use the grid we've already paid for more efficiently before we build more — which we will need to do. But how do we use what we already paid for more efficiently? Do you think that's too wonky? I know we talked about it with Line Vision and our good friend Vishal, and Arnab went through the Deploy Action report on a previous podcast. Where do you put grid utilization? Energy efficiency is well known, but grid utilization feels a little technical.
Senator Josh Becker:
What I've been able to explain that resonates with most folks I've talked to is to say: our grid is like a Walmart parking lot. They don't build the Walmart parking lot for January 6th, Tuesday at 10 a.m. They have to build it for the Saturday before Christmas. So most of the time there's a lot of excess parking. Our grid is like that as well. And this was a big realization for me — in California, the grid is strained around 40 hours a year.
Jigar Shah:
40 hours. That's less than half a percent of the hours in a year, right?
Senator Josh Becker:
Yeah. But we can't fail. No governor wants to fail. No legislature wants to have blackouts. So we have to meet that peak. And so traditionally we just build, build, build to make sure we have it. The reality is we have massive excess capacity most of the time. When we explain it that way, the light bulbs go on and people say, "Yeah, okay, good."
So we want to do two things. One — and this is where we're going to align with utilities — bring on beneficial load. All the electric vehicle load. Data centers, if we do it the right way, can be beneficial load. I have a bill this year around industrial emissions. Industrial is generally 23% of California's emissions, and we've made almost zero progress on it. How can we provide the right incentives to electrify that food processing plant in Fresno and get them on the grid at the time of day when we've got massive excess capacity?
So this concept of beneficial load — and then this other piece around other ways of meeting that peak. Rather than just building, building, building, how can we shift load during that peak and provide the right incentives, reward people for doing the right thing? All those batteries that people now install in their homes — and ultimately all those super-powerful batteries that are in people's cars — how can we use them to shift the peak so we don't have to worry about hitting that mountain? When we explain it that way, it seems to be resonating.
Jigar Shah:
That's great. The other thing I'm curious about — you were talking about metrics before. Is this something else we need to collect data on in terms of grid utilization, so there's more transparency?
Senator Josh Becker:
Yeah. We know today that California's generation capacity is only used about 45% of capacity on average. That's pretty low, but it's not the main problem. As we talked about, the spending problem is really happening mostly at the distribution level. Every time someone needs a panel upgrade, the utility puts in a bigger pole transformer. We're upgrading circuits and substations all over the state with little regulatory oversight, just dealing with a potential problem forecast for some time in the next five years in some scenario.
When the utility is looking at a place on the distribution grid where there might be a problem 10 hours a year — but most of the time the utilization is less than 50% — it'd probably be far cheaper to install a battery or make use of some demand flexibility from customers in that area rather than upgrade that infrastructure. But that's not really happening today. That's one thing I think we need to change. Rein in the "build, baby, build" approach to managing the distribution system. We need to understand at a much more granular level what the utilization is for all these individual circuits. I think we're going to see very low numbers. In Australia, they were finding utilization rates less than 20%.
Jigar Shah:
In California, PG&E is estimating that their wires are used less than 35% of the time. So it's pretty low. I totally agree.
Customer-Owned Reliability and SB 913
Jigar Shah:
Switching over to my hobby horse — you've also put forward Senate Bill 913. I've been frustrated by the fact that there are 3,000 megawatts of behind-the-meter battery storage. You've got the DSGS program. You've got people with electric vehicles, people with smart thermostats, people with smart appliances. And there doesn't seem to be any way for them to get compensated for helping out their neighbor at strategic times — particularly those 40 hours a year you were talking about. So what's broken in the current system?
Senator Josh Becker:
Yeah. First of all, you've helped educate me on this — you and Arnab both, over the last couple of years. It's helped us focus in this area. California's added 17 gigawatts of battery storage, most of that just since I've been here in the last six years. We have two, two and a half million EVs with very powerful batteries, two million heat pumps. And we can continue to add more distributed capacity resources each year.
That's largely due to the national benefits people get. They're saving money through price incentives. However, we really need to do a better job of letting them shift their behavior when the grid needs it. We have mechanisms to do this — we have something called the Resource Adequacy program in California, and we have CAISO's reliability markets. The problem is that the requirements for participation in the RA program and CAISO's market rules have not evolved in a manner that considers the attributes or operational characteristics of those resources.
For example, the current construct does not credit electricity that's exported past the customer's utility meter. So evaluation is currently limited to how much electricity customers are using during demand response events. Valuing exports past the customer's utility meter would allow customer-owned resources to provide additional value beyond that reduction of net demand.
Jigar Shah:
I'm so sorry, Josh, that I had some role to play in getting you down this rabbit hole. My God, this is getting technical so quickly. But it is super important. I think we could actually really increase grid utilization through this bill.
Senator Josh Becker:
Yeah. To simplify it, the market rules are not set up. We've been playing around with it for a number of years, trying to change this or that. That's the problem we're trying to solve here. The forecast is another four to six gigawatts of customer-side battery just by 2030 alone. And as we mentioned, EVs are another resource with bidirectional charging. So we have to change the market rules to allow those folks to participate.
Arnab Pal:
So you're saying the market rules aren't set up. Why is that? Why don't they count today? Why are you having to do all this?
Senator Josh Becker:
Well, listen, I think for good reasons, the regulatory agency has set requirements for what qualifies as resource adequacy. They want to ensure utilities are procuring resources that help meet the local system and all the resource adequacy needs. So that oversight is important. But those same requirements can make it really difficult for these resources to count in the same way, because they have different attributes than traditional ones.
Jigar Shah:
Well, I'll interrupt you here, Josh, and I'll say — because you can't say it — that the CPUC has basically gone to war with distributed generation and didn't really like them participating. Even though the Federal Energy Regulatory Commission is required under FERC Order 2222, the California Independent System Operator has done everything in their power to sabotage how much people get paid. I thank the Lord that you've decided to put this forward to try to rectify a wrong here. It's crazy that people have spent all this money on batteries and can't get compensated to help their neighbor.
Senator Josh Becker:
Yeah. Fundamentally, they say they're working on this and they have a few pilot programs and things like that. But yeah, this cuts to the chase. It requires them to consider this attribute, allow flexible contract terms and program rules, the things we need to make these resources count. So I'm really excited about it. I'm hopeful we can get this one through this year.
Arnab Pal:
And do you think 913 is what it's going to take for these home batteries to count the same as a big power plant for RA? Or is it the first step, and then we have to work with the new governor and work on implementation? What does this look like? You're good at passing bills, but you're one piece of the puzzle here, right?
Senator Josh Becker:
Yeah. I think we have to make it easy to sign up. What's great is, under the DSGS program — a friend who had a Powerwall received an alert that said, "Do you want to participate and have your battery participate in this program?" And they said yes and clicked a button. That was it. It should be that easy to participate. Again, it's about aligning the incentives, changing the market rules so they're fair in this way, but also making it easy for people to sign up.
Jigar Shah:
The reason it's so important, as you and I have talked about, is it's looney tunes to me that all of these companies are based in your district. They're all based in California. They've all got their start in California. They've got their headquarters in California. And their biggest markets are in Massachusetts and Texas. So I really like the fact that you're stitching all of this together in a way such that these companies — which have gotten their venture capital in California — can actually start to deploy their solutions in California. I think it's glorious work you're doing here with SB 913.
Senator Josh Becker:
Yeah. We had a big win in Virginia. As you guys know, you were a big part of that. Maryland and California should be leading. That's actually one of my big things — especially in a time of headwinds from the federal administration with absolutely backward policies on clean energy, we need to get the leading-edge climate states to work together to share ideas. I really enjoy that when I'm reaching out to other state legislators in leading climate states. Virginia led, and that's great. And we've got to get California there too.
Arnab Pal:
For the record, Virginia got the first bill signed by the governor, but you had a bill last year that would have done some of the data elements of that. You do get some credit for going first, even if we didn't get it signed first.
Senator Josh Becker:
I'll take it.
Jigar Shah:
One of the things I'm also curious about is that it feels like there are a bunch of batteries going in between now and 2030 because of the NEM 3.0 fight, where basically all net-metered systems now need to have batteries. You've got a bunch of electric vehicle manufacturers suggesting they're going to have vehicle-to-grid technology added to all of their cars. Rivian just announced that — they want to be able to help you run your house off your car if you're in an emergency situation. You've got Rheem and A.O. Smith saying that all new water heaters they ship are going to be smart water heaters. You've got Carrier coming out saying they've got all these heat pumps now with a battery associated with them. Exciting times.
But one of the things I find fascinating is that no one seems to be including the community choice aggregators. How do you bring it all together? We have all these different people in California — utilities, who are sort of responsible for the wires, that's where the savings are. But you've got the community choice aggregators, who are supposed to be the prosumer, the ones the customer likes, they get their bill from them. How do you bring it all together to get Californians to realize this is really a revolution they should be a part of?
Senator Josh Becker:
Yeah. The community choice aggregators — their boards are all locally elected, and that should be their strength. They're closer to the ground, so to speak. I've actually said to my team, any newsletter I send out — I have 100,000 people who open my newsletter — anytime they have a promotion or an incentive or a program for people to sign up to plug in their batteries, whatever it is, we help spread the word too.
I think it's a good point. We have to remember that all this stuff is still relatively new. People hadn't had batteries in their homes at all, let alone batteries that could then be used to help and support the grid and be knit together to form critical infrastructure. So I don't want to be too hard on ourselves. This is still relatively new stuff. But we do have that opportunity.
Listen, simplifying the utility bill will also be helpful. It's super confusing right now. For my wife and I, when we try to go through it, we have the climate credit that comes from our cap-and-invest system. We took some steps this year to both enlarge that and have it go at the times of year when people really need it, and hopefully make it more prominent so they actually feel it as well.
So I think there's a chance here. We've stopped rates largely from increasing. Kudos to some of the utilities doing some good work in that area too. But now we need to start actually lowering rates. That's how ultimately that trust is won. The education piece around this whole new area is really important, because most people still don't quite grok it just yet.
What It Looks Like When This Works
Arnab Pal:
Yeah, and look, I think we should look at this positively, and we should look at what success looks like. We've talked so much in the weeds about everything, but I do want to take a little bit of a step back. One of the things that makes it easy to work with you is you're pro-climate, you're pro-consumer, you're pro-technology. All those positions are putting you in a good place to help bring down costs for folks. But bringing down costs isn't always just a partisan issue. There are plenty of Republicans who want to bring down costs. While you always stick to your values, you've always been open to working with progressives, moderates, Republicans — if it's in the name of the things you believe in and care about.
My longer-winded question is: it may not matter in California, but can we get Republicans to support us on this stuff? Because it's pretty kitchen-table, it's pretty common sense — use more of your grid, bring down costs. Where do you think they stand?
Senator Josh Becker:
Yeah. Certainly we did the Western grid — we got Republican votes for that. We did get Republican votes for 913. So treating it that way — "Hey, this is a way to save people money." Listen, it's a populist issue. Figuring out affordability is a populist issue. If we can say, "Hey, this is the right way to do it," then we can work together with them on it for sure.
Arnab Pal:
Okay. So if it's 2030 — we now have less than five years to 2030, the next four years — what would you hope the average customer's electricity bill looks like? What's different about how they deal and interact with the grid than how they currently do?
Senator Josh Becker:
Fundamentally, the success is when people want that EV because they're going to save money. They want that heat pump — not only because it's great for the environment, but because it's going to save money. And honestly, getting back to a day when people aren't even thinking about their utility bill that much. It won't be one of the top issues on their mind, because they'll be seeing the benefits of all these new technologies — getting the air conditioning with their heat pump, all the advantages of an EV, all the maintenance advantages — while also saying, yeah, this is a really good way to save money.
That's the vision. I was really proud to represent our state and our country at the climate change talks in Belém, Brazil. I got to talk about how for Californians, clean energy is not just a moral but an economic imperative. We've seen the benefits from conservation. We saw those benefits early on as a state, and we can be a leader in these ways as well.
What's fun about it, as you said, is the technologies are here. A lot of the ideas are here. It's just putting it all together now into place. I think we know what we need to do, and I'm just excited. We've got great colleagues. We're at peak wonkiness here in the State Senate. We've got a lot of really smart people. My colleague Henry Stern, who I met doing Clean Tech for Obama years ago; my colleague Ben Allen; across the board, our pro tem has been a wonderful leader on these issues.
The other thing — last thing — we hadn't talked about is fixing that wildfire liability problem. A lot of the things we've stuck into rates — all of our public-interest programs, our CARE and FERA programs with low-income customers getting discounts — that's stuck in a rate. That's a $3 to $4 billion program. One of the things we did mention is 905 creates what we call a Power Fund, and that's really the vehicle to take those costs out of rates and into the general fund.
Now, we have to wait until there's actually money for the legislature to appropriate it, but we want to get that structure set up. If OpenAI goes public, if SpaceX goes public, if the budgets are really high next year, we can power up that Power Fund and we can take those things out of it. Otherwise, it's a really regressive way to pay for those programs. They benefit the whole state. The wildfire prevention benefits the whole state. We should pay for that out of the general fund, not out of rates. That would be really helpful as well.
If we could do that, as well as the pieces we're talking about using the existing grid more effectively, then I really think we can lower rates substantially while keeping our world-leading progress in clean energy going. So I'm super excited. I'm very optimistic.
Arnab Pal:
I think the takeaway is: you would like to make electricity bills boring and cheap again, right?
Senator Josh Becker:
Yeah, that's it. When people don't think about it honestly, then we've won.
Jigar Shah:
You're going to have SpaceX go public this year, so maybe they'll fund it.
Senator Josh Becker:
Yeah. We've lost a couple of those taxpayers, but actually there are 8,000 SpaceX employees in California — I just heard the other day. So that'll also be good for our general fund. We're a very income-tax-dependent state, so we could have some good budgets ahead.
Jigar Shah:
The other thing for me, honestly — one of the things I find fascinating is that 2025 was the year that President Trump really politicized clean energy. Before then, it was largely a bipartisan issue. It was really depoliticized. You've got a lot of wind power from North Dakota all the way down to the Texas panhandle. You've got a lot of solar power in Texas and lots of other places. Folks are going solar in rural America now just because it's a lot cheaper than what they're getting from other things.
So a lot of what I'm looking for out of your bills, but also all of this momentum around the country, is really getting people to feel fully empowered by this technology. I feel like a lot of people believe that electric utility bills are a tax — a tax that just comes in the mail. They have nothing they can do to control it whatsoever. A lot of what we're doing is saying we're empowering you. We actually are going to give you the keys to control your future. I think that's going to be an exciting time.
Senator Josh Becker:
Yeah. I've seen it. There was an initial wave of this, and I was there for that. I was a seed investor in Opower, which basically turned the utility bill into a marketing document for energy efficiency. They compared people to their neighbors and said, "Here's how much you can save if you were doing just what your most efficient neighbors were doing." That was great. For a while that worked and showed you could lower bills 2 to 4% just by doing that.
Then there was another wave of devices where we tried to say, "Hey, we're going to empower people to understand exactly how much their stove is using versus this other appliance versus that other appliance." The reality is it was still too complicated, and people just didn't care enough. We invested billions in smart meters, but they just weren't really that smart ultimately.
But now we're seeing the next wave of things where you could just prioritize things in your home. That way you don't have to spend money on that costly electricity panel upgrade — because you could say, "Hey, I don't need my car charging and my hot water heater going and my induction cooktop all at the same time. I can prioritize those." So I think this wave will be different from that previous one.
Arnab Pal:
I think I get the last question here, but I'm going to have to make it a two-part question. The first part — I want to click back to a point you talked about, your colleagues. One of the things that frustrates people with politicians is they feel like their problems aren't being addressed. Jigar and I have worked so closely with so many of your colleagues — not just the Senate ones, but Assemblywoman Petrie-Norris and Irwin and Assemblywoman Bauer-Kahan. There are just so many people who get this problem and are actually trying to fix it. In a world where it's easy to be so cynical about politicians, especially with the things you see coming out of Washington, D.C., it's nice to know that people are actually trying to make it better. So I applaud you and all your colleagues for that. That's not the question, of course.
The two-part question is — and we talked about this a little bit — if we get this next phase of the energy transition right, and the last phase was getting us to renewables and reducing emissions, what does the next phase of success look like?
Senator Josh Becker:
First of all, I want to acknowledge — even in the height of the success of the IRA, you'd come hang out in California and really get to know the legislators. As you said, we have amazing people, really terrific, wonky people in the details working to figure all this out. You've seen that. I acknowledge it. I appreciate it. Nationally now folks are focusing on state legislators. I have incredible colleagues in state legislatures across the country. That's really where the action is.
Ultimately, we focus on greenhouse gas reductions. When I started, we had 405 million metric tons, and we've got to get to zero. So that's ultimately my metric. We're down about 385 right now. Our ambitious plan — the scoping plan — says we've got to get to 75 million metric tons by 2045. And then we need CDR, carbon dioxide removal, which I've also spent a lot of time on, to get the rest. So those are the ultimate metrics in this space.
Getting there: in the first part, electrify everything. We've adopted that mantra. We've got to electrify everything. And we can't electrify everything if rates are really high. That's where I focus on lowering the rates, electrify everything, while we continue to build out clean energy generation, work on permitting. That's where I'm aligned with industry — we have to streamline permitting and siting and get stuff done faster. We did the largest solar and storage project in the world, the Darden project, in under a year with the new opt-in AB 205 permitting process. We have to do all those things.
Electrify everything once we get the renewable, and then focus on some of these hard-to-decarbonize industries. That's why I'm focused on industrial emissions. It's not the sexiest thing, but we have to find ways for those hard-to-decarbonize industries. The very first bill I passed in the state legislature — working with my old classmate — I met with the cement industry and spent a lot of time with them. They said, yeah, we want to do this. We set a plan. Passed a bill for 40% reduction by 2030 in emissions, and 100% by 2045. At the time it was the only piece of the California economy that had a net-zero target on it after our bill was passed.
So the way I look at it, my team and Erica, Isabel — we focus on what are the major sources of emissions? Transportation is 50%, so we spend a lot of time on this podcast talking about it. Then buildings, another 15%. The grid, another 15%. Industrial. Agriculture is 7%. We have to tackle each piece of that. Our bills are in all those areas.
Jigar Shah:
The thing that makes me so inspired by what you're doing, Josh, is that you're anchored in the science, but you like a good rock concert like anybody else does. We're in a place right now where we're making this fun. When you think about how many entrepreneurs are coming up with cool stuff, they're raising $100 million rounds, they're going to go public this year — they're also changing the face of the electric utility.
We were dead set against any of this stuff just two years ago. Everybody was like, "Nope, we're going to build new generation, upgrade transmission, upgrade distribution." Today, you've got the unions that are fully for distributed generation and recognize that having a two-way transactive grid where people basically build microgrids in their homes and help their neighbors with those microgrids is the future. That's a big change in two years. I've talked to legislators around the country, and they are inspired by your work and inspired by what you guys continue to do. So thank you. Thank you for all the work you're doing and all the work you're continuing to push through.
Senator Josh Becker:
Yeah. Well, it's fun. In the past, I worked — I was doing startups in my professional life and I'd do politics on the side. With clean energy, we started with Clean Tech for Obama, and you realize you can combine those passions, right? We can make the world a better place and also create the conditions for this industry to rise. That's been super fun. This is a great place to do it. I just appreciate that you care about California. You know California has to work. As you always say, it can't be that we tried hard and did some good stuff but ultimately didn't succeed. California has to work as a model. I appreciate your commitment — both of yours — and organizations like Deploy getting people involved in the process. State legislatures can have a huge impact. And it's fun.
Jigar Shah:
Well, have a fantastic legislative session, my friend.
Senator Josh Becker:
Okay. We'll talk to you guys again.
Arnab Pal:
Sounds good.
The Debrief
Jigar Shah:
Well, that didn't disappoint. Josh Becker always brings it, and it feels like he's got a pretty full agenda in California.
Arnab Pal:
Yeah, someone's got to have a full agenda somewhere, and I'm glad our friend is the one who's carrying the mantle here.
Jigar Shah:
One of the things I found fascinating — and we heard about this when we did our conference in Sacramento — was that PG&E is really laying it out for people. They're saying: if you let us build data centers and you do it by focusing on grid utilization, we can get bills down by 20% for everybody, because we can spread the cost of wildfires and the cost of the wires we already paid for across a much larger set of kilowatt-hours. I thought that was fascinating. It feels very esoteric and in the weeds. So I wonder whether you think we can really get the level of mind share around pulling that off.
Arnab Pal:
Look, we've met with PG&E multiple times now, and they've gone out of their way to tell us what they're doing. I believe them. I believe they have a pathway to reduce rates. Will they actually do it? That's what remains to be seen. I believe they are trying. The other thing I've told them directly — which I'll tell everyone here — is if they go to the legislature and the state and say, "Hey, we're already doing this, we're going to try," no one's going to believe them. So they have a technical problem and they have a human problem they have to deal with.
Jigar Shah:
A lot of this is going to come down to who wins the primary within the governor's race. Some of those candidates are going to be more aligned with that vision PG&E is putting forward — which, frankly, I'm aligned with. I'm not sure we're going to build 1,500-megawatt data centers in California that require 800 megawatts of behind-the-meter natural gas to get built. But it does feel like all of those 3,000 megawatts worth of batteries registered in the DSGS program that could be used in a virtual power plant could be used to unlock a bunch of data center capacity.
Arnab Pal:
A lot of this has to be PG&E laying out what their intentions are — and the other utilities in California — and giving on some things, understanding that the status quo and the model we've had for years is no longer working. There needs to be a new model, which could be good for everyone. Part of that is this idea that they'll interconnect folks and not serve them every minute of every hour of every day —
Jigar Shah:
Well, they don't now. With all the frequent public safety shutoffs, folks are out of power for several days a year.
Arnab Pal:
Yeah. Well, in this case it would be upfront understood with these larger loads. Part of it is them agreeing to change the way they plan their resources. What we've been talking about from the beginning is: hey, look, we aren't just planning to meet demand at all times. We aren't planning only for reliability. We're planning for reliability and efficiency. That's going to totally change the way utilities work. What we've been open to PG&E about is that you guys need to get on board with that. The same goes for Edison and San Diego Gas and Electric and the other utilities. That'll be the first step to actually bringing down costs for folks.
Jigar Shah:
The one thing I think is confusing for everybody — which we have to keep reminding everybody about — is that California generation costs have never been lower. The fact that we built so much solar and wind power has actually reduced the cost of generation in California. We have negative prices a lot. Then we built batteries, so the duck curve is gone. It doesn't look like a duck anymore. It looks like it's flattening out with all that battery capacity. So this really is a wildfire problem — which is climate-related — and a wires problem. We've got to get a lot more out of the grid we've already paid for.
Arnab Pal:
Yeah. We could do the best we can on the wildfire side, but there are going to be some things out of our control. We have to manage it better. There are a lot of smart people thinking about that. On the wire side, that's where we can make a lot of progress. That's where we need to retool the business model, retool how people plan, retool how large loads interconnect. Everyone's got to join forces here, or you're going to see all these people who are upset right now in the state of California want wholesale change. And maybe that's the way we need to go. We'll see.
Jigar Shah:
Arnab, it is always a pleasure to have you on. You always bring a lot of insights to what we're discussing here. So thanks for being available.
Arnab Pal:
Thanks for having me.
Ask Jigar
Jigar Shah:
Hello, welcome to Ask Jigar — a weekly segment on Energy Empire where I answer your energy questions. Ask Jigar is supported by our friends at Octopus Energy. If you want to submit a question, the link is in the show notes. All right, let's get into it.
Our first question is from our good friend Andrew Revkin. He asks: when you were running the energy loan program, there was an abundance of federal assets for clean energy and efficiency. You wisely told me that the key need was for community-based energy mavens to connect local decision-makers with federal resources. What's your advice to local leaders now?
I would say my advice is the same. When you think about how much energy costs have gone up and just how many solutions we have that are ready to go — whether it's solar and battery storage, electric vehicles, heat pumps, insulation, next-generation technologies for heating, ventilation, and air conditioning to really reduce your costs of managing your HVAC units at work — we have a lot of technologies that have paybacks of less than four years that just aren't being installed. When you ask people, they say, "We've never heard of them. We don't know those companies."
I talk about a lot of those companies on my LinkedIn or on my podcasts or on Twitter. But we've got to collect that information and we've got to go to city council meetings. We've got to go to county council meetings. We've got to go to the school board meetings and say, "Hey, this stuff is cost-effective. How about we figure out how to deploy it at this moment of an energy crisis?"
The next question is from Joe Murray, a student at Duke University. He talked about being at a Goldman recruiting event this past fall and asking a managing director what he thinks about virtual power plants and how it'll influence valuations for utilities.
Look, at the end of the day, the virtual power plant and grid utilization stuff I'm working on, and other people are working on, is not going to reduce utility stock prices. What it'll do is get them to stop overspending on infrastructure that is underutilized. Today we're faced with 9% rate increases for as far as the eye can see. If they deploy virtual power plants, if they deploy grid-enhancing technologies, advanced conductors, lots of stuff that's lower cost — then you could imagine using the grid we've already paid for more efficiently and keeping rates flat. And if you then add data center load growth, you might actually be able to reduce utility bills by 10%. So this is not a bad thing for utilities — as much as it's a culture change. They're used to doing things the old, most expensive way. We've got to get them to do things in a way that's smarter for their ratepayers and their governors, frankly — many of whom are running for election right now.
The next one is from Rod Adams. He asks: please explain why nuclear energy supporters should love cheap battery storage.
The answer is, because it's not about nuclear and it's not about solar and it's not about wind and it's not about natural gas or coal or hydro. It's about the grid. The grid is the greatest engineering accomplishment of the 20th century — not any of those one technologies. Battery storage allows you to manage the grid better. We have the largest commodity supply chain in the world that doesn't feature storage in the electric utility system. Whether you think about our food system, or we're all learning about storage with the Strait of Hormuz challenge in fuels, or whether we talk about other commodity supply chains — we feature storage. But in the grid, we don't, except for some pumped hydro. Now we're adding storage, and the storage helps nuclear, it helps solar, it helps wind, it helps natural gas, it helps everything run better. And higher grid utilization is how we get to lower electricity bills for everybody.
Our last question is from Karma Dispensary from the energy subreddit on Reddit. They say: I live in Northern California, and the utilities feel less reliable every year. After buying a place, we're in the process of getting enough solar and batteries to be entirely self-sufficient. I know there are many benefits to distributed grids. I can't shake the impression that if everyone makes this decision, grids will be much worse off — fewer users to spread capital investments over. Is mass disconnect something you think about much, and is it a significant threat to the grid?
Look — mass defection is a significant threat to the grid, as is net metering 2.0, as you get to 10% of all the homes in California having solar on them. But now we have NEM 3.0. NEM 3.0 features a much higher fixed cost, and it also features that you don't really get paid much to export power back into the grid. So you're really running your home more like a microgrid, where you basically take it off-grid. That's awesome.
Because remember, we're going to have to electrify everything. Right now in the United States, our primary energy is roughly 25% electricity, 75% non-electricity. China is at 35% electricity, 65% non-electricity. So we should be able to meet what China has done. If we went from 25% electricity to 35% electricity, that means a lot more electric vehicles. It means a lot more heat pumps. It means maybe induction stoves. All of that is increased demand on the circuit your home is on. The question becomes: how do we get the utility to use the battery you're going to install as part of the grid? That's a lot of the work we've been doing in California through a nonprofit I support called Deploy Action. It's also a lot of the arguments we're having across the country.
When you think about data center load growth, when you think about all these other things, figuring out how to do virtual power plants with your battery is how we actually get to electrify more of the grid, more of our primary energy, while reducing electricity costs for everybody. So everybody should be thanking you for putting solar and battery storage in. When the utility finally offers you a virtual power plant, you should opt in and get the discount they offer you for doing that.
That's it for this week's Ask Jigar. Thanks to our great friends at Octopus Energy for supporting this segment. If you've got a question you want me to answer, send it in. The link is in the show notes.
Outro
Jigar Shah:
As usual, we want to thank our podcast sponsors. We really just couldn't do it without them. And we really want to thank Simon, who is sitting there behind the scenes just making us all sound good by selectively editing out all the dumb things I say.
You can find us anywhere you listen to podcasts — Apple Podcasts, Spotify, YouTube. Subscribe, send comments. It's actually super valuable, and folks have been emailing us like crazy, which is great. You can get to our email address through our energyempire.fm website. We're actually pretty responsive, surprisingly to me. But really want to thank everybody for being here.